One are of the broader real-estate market that is oft overlooked by people who don’t specialize in it is that of agricultural real estate. From a mortgage perspective, loans for farms can be different (particularly if they’re working farms, and if they’re not owner-occupied) than a standard house, and may unnecessarily scare brokers off. From an agent perspective, things like curb appeal may not matter as much. But there’s reason to believe that if you’re in the industry, you’d do well to look at adding agriculture to your portfolio.
Right now, farmland values in Washington and Oregon — particularly in Washington, where the heavy rain and snowfall late last year ended the drought for much of our state — are strong. But in California, agricultural real estate values are beginning to cool. California real estate has always been expensive, and with the ongoing drought there, water prices remain high. So far, the astronomical prices of high-end nuts have been enough to offset those increased water prices, but the prices of nuts have been falling recently, and we’re even starting to hear rumors of escrow renegotiation.
Staying on top of these trends can put you in a great position, regardless of your role in the industry. Given the current global economy, there is a lot of interest in agricultural real estate from institutional investors and wealthy individuals who see it both as a hedge against the strength of the dollar, and a better return than treasuries are currently getting (e.g., Farmland Partners, Inc. (FPI) is currently paying a dividend of almost 5%).
The USDA is predicting that farm income will be down 3% this year. If the drought continues in California, then you’re very likely to see some buying opportunities here. Agricultural real estate may be just the thing you need to be pitching if your an agent, broker, or financial advisor.